Thursday, October 17, 2013

For those not familiar with the term, the Lake Wobegon effect is the case when all or nearly all of a group claim to be above average, and comes from the finctional town where "all the women are strong, all the men are good looking, and all the children are above average."

Interestingly enough, as Wikipedia states, this effect of the majority of the group thinking that they are performing above-average "has been observed among drivers, CEOs, hedge fund managers, presidents, coaches, radio show hosts, late night comedians, stock market analysts, college students, parents, and state education officials, among others."

So, a natural question was whether this effect also appears in an online labor setting. We took some data from an online certification company, similar to Smarterer, where people take tests to show how well they know a particular skill (e.g., Excel, Audio Editing, etc.) The tests are not pass/fail but more like a GRE/SAT score: there is no "passing" score, only a percentile indicator that shows what percentage of other participants have a lower score.

Interestingly enough, we noticed a Lake Wobegon effect there as well: Most of the workers that displayed the badge of achievement, have scores above average, giving yet another point for the Lake Wobegon effect.

Of course, this does not mean that all users that took the test performed above average. Test takers have the choice to make their final score public to the world, or keep it private. Given that the user's profile is also used in a site where employers look for potential hires, there is some form of strategic choice in whether the test score is visible or not. Having a low score is often worse than having no score at all.

So, we wanted to see what scores make users comfortable with their performance, and incentivizes them to display their badge of achievement. Marios analyzed the data, and compared the distribution of scores for workers that decided to keep their score private, compared to the workers that made their performance public. Here is the outcome:

It becomes clear that scores below 50% are not posted often, while scores that exceed 60% have significantly higher odds of being posted online for the world to see. This becomes more clear if we take the log-odds of a worker deciding to make the score public, given the achieved percentile:

So, in the world of online labor if you ever hire someone who chose to display a certification, you know that there are good chances that you picked a worker that is better than average, at least in the test. (We have some other results on the predictive power of tests in terms of work performance, but this is a topic that cannot fit into the margins of this blog post :-)

Needless to say, this effect illustrates a direction that will take crowdsourcing, and labor markets in general, out of the race-to-the-bottom, market-for-lemons-style, pricing, where only price can separate the various workers. As education history serves in an offline setting as signaling for the potential quality of the employee, we are going to see more and more globally recognized certifications replacing educational history for many online workers.